In an effort to effectively manage their operations, most business owners need to anticipate the cost of their workers compensation costs…. which in California can be a moving target. The challenge is that workers compensation rates fluctuate from year to year and are also cyclical. Typically, workers comp rates will go full circle within a 7-10 year period. In 2003-2004 Senate Bill 899 (SB 899) was passed during Governor Arnold Schwarzenegger’s administration. At that time, California employers were frustrated with escalating workers comp rates. The effect of SB 899 was that several workers comp benefits for injured employees were reduced and/or controlled which reduced workers comp rates for California employers. Because of SB 899, we have familiar terms such as “Medical Provider Network” and “apportionment”.
As California approaches that 7-10 year workers comp cycle (since the implementation of SB 899), in September of 2012, Governor Jerry Brown signed a package of legislative reforms which are outlined in Senate Bill 863. According to Governor Brown, when the majority of this bill goes into effect on January 1, 2013, it is expected to increase benefits to employees while reducing costs to employers. Under SB 863, it is anticipated that collectively California workers, among other issues, will see an increase in permanent disability benefits by 30% and provide higher quality medical treatment. For business owners, according to Governor Brown, they can expect a reduction in overall workers comp losses by close to 1 billion as well as reducing litigation and claims adjustment costs.
Critics of SB 863 say there are many unanswered questions. Preliminary conversations with insurance companies indicate that they will not be lowering their rates until some of the regulations are clarified. Senate Bill 863 is more than 100 pages and much of the law is still a mystery that awaits accompanying regulations. There is less than 2 months for SB 863 to be regulated and clarified.
In the meantime, while politicians, insurance companies, medical providers and others are trying to grasp the issues surrounding Senate Bill 863, employers should continue to implement safety programs and risk management techniques to minimize their individual exposure to loss. Please contact your agent at HWP Insurance to discuss your risk assessment or to receive updates on Senate Bill 863 as they unfold.